Sports world scrambling to boost ratings amid technological changes – Fort Worth Star Telegram
Against the backdrop of staggering one-year declines in television ratings for College Football Playoff semifinal games (36 percent) and the 2016 NCAA men’s basketball championship game (37 percent), administrators in the Big 12 pulled the plug on discussions about creating a conference television network during their spring meetings in June.
The decision, said Oklahoma President David Boren, was an easy one because independent research has shown the television industry is “caught in a time warp in the marketplace” between delivering content via traditional network telecasts and looking ahead to a future when some of the most lucrative programming could be handled by digital carriers such as Google, Facebook, Amazon or YouTube.
Boren reiterated that position in October, when league officials announced the 10-member league would not expand after three months of discussions on that topic.
The league’s deal with ESPN and Fox runs through the 2024-25 school year.
A spokeswoman for Elemental Technologies, an Amazon Web Services company, said “live event streaming is at our core” and cited experience in handling Olympic sports, World Cup 2014, International Cricket and other events. She said Amazon’s customer list already includes the Pac-12 Network, NBA, EuroSport and ESPN.
But digital companies are not synonymous with live sports programming in the minds of most U.S. sports fans. That could soon change, said Boren and Pac-12 Commissioner Larry Scott.
“Those are more powerful companies and they offer more flexibility for the consumer,” Scott said, referring to digital carriers during a CFP meeting in April as he and other conferences discussed the future of televised sports in America. “Short term, we’re dealing with a lot of frustration. But long term, I love our position.”
That perspective makes things dicey for traditional carriers like ESPN and Fox, where executives paid $2.6 billion for the primary television rights for Big 12 football and basketball telecasts. Both networks have lucrative contracts with other leagues, including the Pac-12.
In the case of ESPN, the network signed off in 2012 on a $5.6 billion deal to be the exclusive carrier of the CFP playoffs through the 2025 season at approximately the same time the network agreed to long-term deals to air Monday Night Football ($15 billion) and NBA games ($12.6 billion), among other high-dollar acquisitions.
Profitable partnership shows cracks
From a college sports perspective, the trickle-down effect for ESPN has been partnerships in launching conference networks with the Big Ten, SEC and ACC.
The Big 12 has no conference network because ESPN partnered with Texas to launch the Longhorn Network in 2011 as part of a 20-year, $300 million agreement.
Until digesting data from industry analysts at the Big 12 spring meetings, Boren had been the league’s loudest proponent for creating a conference network or converting LHN into an entity that addressed all 10 league teams rather than just one. But his tune changed abruptly when he saw indicators of the changing marketplace for college sports.
In October, ESPN lost 621,000 subscribers, the largest drop in its history, as millions continue to drop cable TV. ESPN has now lost 11 million customers since 2011. Disney’s 2016 earnings report shows that operating income fell $207 million at its cable networks.
Such is today’s financial landscape at the self-proclaimed “World Wide Leader” in sports, the cash cow that college administrators plan to milk for most of the next decade to provide escalating annual financial disbursements to members of Power 5 conferences.
Amid an 11 percent ratings drop, the NFL sent a memo to owners in early October to ease concerns about declining viewership.
The reality, Boren acknowledged, is that ESPN is far from alone among traditional carriers trying to meet financial commitments made years ago to sports organizations in an environment driven by new technologies and fresh distribution methods.
“We’re now going through a tremendous transformation in terms of the platforms on which people are viewing sports content,” Boren said. “Everyone’s trying to absorb that. If you look at the membership sustainers, say ESPN or Fox, you see a pretty dramatic drop in revenue and subscribers, and they’re having to absorb that.
“Media markets themselves have not sorted out new business models or ways to monetize digital content fully. The marketplace has taken the Big 12 Network, in the traditional sense, off the marketplace. That would be true for the SEC or the Big Ten or anybody else coming up for the first time to create a network at this particular time.”
Digital changes coming
While Boren credited those leagues with having better timing in getting dollars flowing from traditional networks, he said the Big 12 may be fortunate in the long run by waiting to partner with new technology companies. Because future conference networks may feature a video on-demand environment, which would not require around-the-clock linear programming options, Big 12 Commissioner Bob Bowlsby called it “an exciting time to be involved” in a start-up network because the market is “very different than five years ago or 10 years ago.”
A Netflix spokeswoman said her company has no interest in entering the live sports market, but Big 12 officials anticipate an expanded marketplace with multiple digital players in the not-too-distant future.
We certainly, as a conference, want to be one of the first to be involved in the new digital world and the changes that are taking place.
Oklahoma President David Boren
“We certainly, as a conference, want to be one of the first to be involved in the new digital world and the changes that are taking place,” Boren said.
So does everyone else with sports programming to sell, which explains why Scott is bullish on the future of his Pac-12 Network, which has been stymied in the first three years of its existence because DirectTV has yet to distribute the product.
“Right now, distributors have a stranglehold on markets. To a large extent, that is going to dissipate,” Scott said. “It’s an exciting time because you have the clear sense that, three to five years from now, there’s going to be a whole host of new distributors with some of the leading technology companies. Places like Google, Facebook and Amazon. We’re in a good position long-term.”
Scott espouses that viewpoint despite that his product is unique (one national channel, plus six regional channels), is wholly owned by the conference and, to this point, has yet to produce comparable revenues to products rolled out by the SEC and the Big Ten in concert with ESPN. He also downplays the significance of traditional TV ratings in this changing environment, an outlook shared by Dan Gavitt, the NCAA vice president of men’s basketball championships.
Despite capping last season with one of the most thrilling finishes to any NCAA men’s title game, the overnight ratings for Villanova’s 77-74 victory over North Carolina on April 4 in Houston were down by 37 percent from ratings for the 2015 title game between Duke and Wisconsin. The biggest reason? The 2016 game was carried by TBS, a cable channel, while the 2015 game aired on CBS.
The 2016 game, decided on a buzzer-beater, drew a peak audience of 22.3 million, making it the fourth-lowest-rated men’s championship game in NCAA Tournament history. It also was the first title game to be shown on a cable outlet, a factor that caused NCAA officials to brace for a ratings drop. But by 37 percent?
“We as the NCAA look at overall viewership,” Gavitt said, citing a 2016 spike in fans’ viewership on mobile devices through the NCAA’s March Madness Live app. “The television ratings were off from last year. But the digital numbers, with that March Madness Live product, continues to grow at 40 to 60 percent each year. It’s done just incredible numbers.”
What is the ceiling for such an emerging digital presence?
“We don’t know,” Gavitt said, echoing a common theme among sports administrators with games to peddle. “We are seeing that paradigm shift between traditional television and mobile devices. What we do is aggregate all those numbers. While we may see some fluctuation with television ratings, we’re seeing a continued increase overall in digital viewing habits. And our media partners can monetize that.”
The television ratings were off from last year. But the digital numbers, with that March Madness Live product, continues to grow at 40 to 60 percent each year. It’s done just incredible numbers.
Dan Gavitt, NCAA vice president of men’s basketball championships
But do today’s media partners receive enough financial return from strong performances on digital platforms to make up for dramatic shortfalls in television ratings? That is the question that seems to haunt the industry as it ponders the future of live sports telecasts, considered the last bastion of “appointment television” left in an industry dominated by DVR machines that provide consumers a way to watch shows on their own timetable while zipping past the commercials that help fund the telecast.
Live programming still gold
With live sporting events, fans typically sit through the commercials to avoid missing any action. That makes sports programming an attractive buy for sponsors, a practice that led to today’s rights fees for sports content. The most lucrative of those deals involves the NFL, which is slated to receive about $3.1 billion per year from contracts with Fox, CBS and NBC through the 2022 season. ESPN also has a rights package that pays the NFL $1.9 billion per year for its telecasts.
Despite drops this season, the NFL is still ratings gold. The four highest-rated TV shows in U.S. history are Super Bowl telecasts, topped by the 114.4 million viewers who watched Super Bowl XLIX on Feb. 1, 2015. Such viewing patterns do not exist in other sports, including many where ESPN is heavily invested while experiencing its ongoing subscriber shortfalls.
In a January interview with The Wall Street Journal, ESPN President John Skipper attributed the declining subscriber numbers to a desire for “lighter cable packages” among non-sports fans who have dropped the network. He told the newspaper: “That impact hasn’t leaked into ad revenue, nor has it leaked into ratings. … We still see people coming into pay TV. It remains the widest-spread household service in the country after heat and electricity.”
Yet ESPN’s ratings for last year’s CFP semifinal football games, held Dec. 31, experienced a stunning 36 percent drop from ratings the previous year. The semifinal games for the 2015 season drew a 9.9 rating for the Cotton Bowl and a 9.7 rating for the Orange Bowl. The previous year, when the semifinal games were played Jan. 1 in the inaugural season of the playoff era, the Rose Bowl drew a 15.5 rating and the Sugar Bowl got a 15.3 rating during prime time.
$10 million Amount paid by Twitter for NFL rights to broadcast 10 Thursday night games.
In April, ESPN officials met with CFP executives in Irving to discuss the ratings drop for the 2015 contests, played on a weeknight. On July 28, CFP officials announced plans to limit future semifinal games to Saturdays and holidays for the remainder of the 12-year deal with ESPN. If Dec. 31 falls on a Saturday or a holiday, as it will this season, the semifinal games will remain on New Year’s Eve. If not, other dates have been announced for the semifinal contests.
In a statement, CFP executive director Bill Hancock said CFP executives “concluded that making these changes would be the right thing to do for our fans. We tried to do something special with New Year’s Eve, even when it fell on a weekday. But after studying this … our previous call is reversed.”
The one constant, regardless of the sport and the network involved: No one will be satisfied with recurring ratings drops of 36 or 37 percent even with spikes in digital viewership. Although organizers point to extenuating circumstances created by a date switch for playoff games (football) and a network switch for the title game (basketball), eyebrows were raised when such declines surfaced this year in college athletics’ highest-profile events.
But that drop did not diminish the appetite for ESPN and Fox to sign off on a combined $2.64 billion worth of rights fees to continue showing Big Ten football and basketball games for the next six years. Based on published reports, ESPN will pay an average of $190 million per year for its share of the package, with Fox paying an average of $240 million per year.
Having the Big Ten contracts finalized will help set the market for Big 12 officials when they seek extensions of their existing deals, which expire with the 2024-25 school year. Bowlsby anticipates a wide variety of bidders, including some newcomers to the process.
“It’ll be interesting to see what happens,” Bowlsby said. “There seems to be an almost limitless appetite for content. And live sports is one of those places that is time-sensitive, destination viewing. It’s a different environment. And I think, because that’s the case, you will see media companies continue to acquire rights. The strength of the market is going to vary over time.”
Likewise, the identities of the primary bidders could vary. The lingering question is how technological breakthroughs will impact viewing habits for the next generation of sports fans.
Fort Worth resident Lance Barrow, CBS’ coordinating producer for golf and NFL telecasts, has seen viewing habits change during his 40 years with the network. But a few constants remain, as evidenced by the strength of NFL ratings on its primary network carriers (CBS, Fox, NBC) when compared to the up-and-down ratings experienced by cable providers for this year’s biggest college telecasts.
“Not everybody gets the cable channels in this world. We all think they do, but they don’t,” Barrow said. “But everybody gets CBS. It’s still free TV.”
That will have the clarity to where it really will seem like you’re sitting in the stands or you feel like you’re standing next to Jason Garrett as the game goes along.
CBS coordinating producer for golf and NFL telecasts Lance Barrow, on 4K cameras as “the next great thing”
Also keeping pace with the desire for more ways to watch sports on mobile devices, in Barrow’s estimation, is the evolution of network presentations through 4K cameras that are expected to take the HD viewing experience to another level when fully implemented.
“That’s the next great thing,” Barrow said of the 4K cameras, which eventually will allow viewers to sit on the couch in their living room and “feel like you’re sitting on the bench with the Dallas Cowboys.”
“That will have the clarity to where it really will seem like you’re sitting in the stands or you feel like you’re standing next to Jason Garrett as the game goes along,” Barrow said.
Having such an option available on a big-screen TV could keep lots of viewers focused on network NFL telecasts in future seasons. But the dynamics are constantly changing as technology advances, creating what Barrow called “so many outlets that people have the chance to watch or pay attention to” in addition to the network TV affiliates.
For every sport, the shifting TV landscape creates challenges in getting noticed and remaining relevant. Few sports were more challenged than the LPGA Tour when Mike Whan became the organization’s commissioner in 2010.
From a television perspective, Whan inherited a product that had only 200 hours of TV coverage each season, with 60 percent of the telecasts aired on a tape-delayed basis.
“There’s nothing worse than watching sports when you already know the outcome from the internet,” said Whan, who focused on expanding the LPGA’s digital footprint and encouraged players to become more active on social media. “Now, we don’t have events that aren’t televised. We’re at 92 percent live [telecasts]. Purses are up 60 percent. And we’ve got 450 hours of TV.”
That does not mean all issues are solved. Of the LPGA’s television coverage, only seven tournaments have windows on network TV in lieu of the Golf Channel. But that’s up from one network TV slot in 2010.
“Long term, that’s what we’ve got to improve,” Whan said. “We just don’t get many casual fans to experience us and we have to introduce ourselves to the casual fan. You do that through TV, mobile and social media.”
Tracking meaningful gains in those areas can be tricky, Whan said, because the growth curve can be steep from year-to-year as technological advances surface. Particularly for an organization that is playing catch-up in those areas.
“Mobile and social, to throw out percentages, is almost humorous,” Whan said. “We’re up 1,000 percent on social media [from five years ago], but you almost have to be to keep up with the social trends. It’s a pretty interesting time for us. The good news is that, no matter what you use as a gauge, we’re better.”
In other words, it’s all about the technology if you want to be a growth sport or a major player in today’s marketplace. The challenge for sports administrators, going forward, will be partnering with the right companies as technology evolves to assure that their brands evolve as well.
Jimmy Burch: 817-390-7760, @Jimmy_Burch